Stocks fluctuate following news of alleged insider trading at ImClone, profit warnings
By Amy Baldwin AP Business Writer
NEW YORK (AP) – Wall Street managed a sharp snapback Wednesday, rising sharply despite allegations of insider trading at ImClone and more profit warnings. But while the Dow Jones industrials rose 100 points, analysts attributed much of the buying to technical factors, not a turnaround in investor sentiment.
A cautious mood dominated the session following a big selloff Tuesday. New charges of unethical business practices – this time, the arrest of former ImClone chairman and CEO Sam Waksal on insider trading charges – added to the market’s ongoing uneasiness, as did a string of profit warnings from such companies as Safeway and Monsanto.
“The market’s a mess,” said Charles White, portfolio manager at Avatar Associates. “All of this is not conducive to rebuilding any normalcy or confidence in the market.”
The Dow Jones industrial average closed up 100.45, or 1.1 percent, at 9,617.71, according to preliminary calculations. On Tuesday, the Dow fell 128.14 Tuesday to its lowest close since Nov. 5, when it stood at 9,441.03.
Broader indicators also finished higher. The Nasdaq composite index rose 21.94, or 1.5 percent, to 1,519.12, having dropped 33.51 Tuesday to its lowest close since Oct. 2.
The Standard & Poor’s 500 index advanced 6.66, or 0.7 percent, to 1,020.26 following Tuesday’s loss of 17.14, which had brought the index to its lowest close since Sept. 26.
But analysts said the gains were meaningless and attributed them to a practice commonly called short covering. When short covering occurs, investors are forced to buy stock to replace shares that they earlier borrowed and sold on the expectation that the market would fall further.
“People are buying back to get even,” said Bryan Piskorowski, market commentator at Prudential Securities. “This is no brave new world. One day of short covering in June is not the silver bullet for the market.”
Worries about business ethics, along with disappointing earnings and outlooks have pressured Wall Street for weeks, sending the major indexes near the Sept. 21 lows that followed the terrorist attacks.
After trading lower most of the session, ImClone closed up 28 cents to $7.83, having shed 90 percent of its value since December because of the rejection for star drug Erbitux by the Food and Drug Administration and investigations into possible insider trading. On Tuesday, the company’s new chairman and CEO, Harlan Waksal, told shareholders the application it submitted for Erbitux was flawed.
But ImClone’s troubles, particularly the arrest of its former CEO, hurt Martha Stewart Living Omnimedia, which fell $2.10 to $15 on reports that Martha Stewart, a friend of Sam Waksal, sold her remaining 3,000 ImClone shares Dec. 27. Stewart’s spokesman had said she received no inside information on ImClone.
Among gainers, Dow industrial Procter & Gamble surged $4 to $93 after it raised its fiscal fourth-quarter earnings estimate, and Merrill Lynch upgraded its shares to “strong buy” from “buy.”
Maytag climbed $2.97 to $45.27 after saying its second-quarter profits will beat analysts’ expectations.
Advanced Micro Devices rose 34 cents to $9.67 after Prudential Securities raised its recommendation on the chip maker’s shares to “hold” from “sell.”
Poor earnings outlooks drove down other stocks. Safeway dropped $4.42 to $31.76 after the grocery store company reduced its second-quarter and fiscal year profit forecasts.
Agriculture company Monsanto, which also lowered its estimates, fell $1.30 to $25.55.
Despite the late-day rally, declining issues narrowly outnumbered advancers 16 to 15 on the New York Stock Exchange. Volume was heavy at 1.72 billion shares, compared with 1.39 Tuesday.
The Russell 2000 index, which tracks smaller company stocks, inched up 0.21 to 462.99, following Tuesday’s loss of 6.51.
Overseas, markets were sharply lower Wednesday with Japan’s Nikkei finishing down 1.1 percent. In Europe, France’s CAC-40 dropped 2.6 percent, Britain’s FTSE 100 tumbled 1.7 percent, and Germany’s DAX index lost 2.1 percent.
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